Wells Fargo Bank, Nat'l Ass'n v. Unknown/Undiscovered Heirs (In re Shire), S-17-263

• Decision Date: 16 February 2018
• Docket Number: No. S-17-263,S-17-263
• Citation: 299 Neb. 25,907 N.W.2d 263
• Parties: In re Trust of Jennie SHIRE, deceased. Wells Fargo Bank, National Association, Successor Trustee, appellee, and Shirley Smith Gronin, beneficiary, appellant, v. UNKNOWN/UNDISCOVERED HEIRS et al., appellees.
• Court: Nebraska Supreme Court

299 Neb. 25
907 N.W.2d 263

In re Trust of Jennie SHIRE, deceased. Wells Fargo Bank, National Association, Successor Trustee, appellee, and Shirley Smith Gronin, beneficiary, appellant,
v.
UNKNOWN/UNDISCOVERED HEIRS et al., appellees.

No. S-17-263

Supreme Court of Nebraska.

Filed February 16, 2018.

Daniel E. Klaus, of Rembolt Ludtke, L.L.P., Lincoln, for appellant.

John C. Hurd and Krista M. Carlson, of Wolfe, Snowden, Hurd, Luers & Ahl, L.L.P., Lincoln, for appellee Wells Fargo Bank.

Chris Blomenberg, of McHenry, Haszard, Roth, Hupp, Burkholder & Blomenberg, PC., L.L.O., Lincoln, for appellees Unknown/Undiscovered Heirs.

J.L. Spray, of Mattson Ricketts Law Firm, Lincoln, for appellees Robert Banner et al.

Heavican, C.J., Cassel, Stacy, Kelch, and Funke, JJ.

Funke, J.

907 N.W.2d 266

This appeal concerns a petition for trust proceeding, filed by the trustee, Wells Fargo Bank (Wells Fargo), to provide increased disbursements from the trust of Jennie Shire (Trust) to the remaining lifetime beneficiary, Shirley Smith Gronin. The county court for Lancaster County ruled that a modification of the terms of the Trust was not authorized by the Nebraska Uniform Trust Code.¹ We affirm.

BACKGROUND

The Trust was created by the last will and testament of Shire, executed on September 10, 1947. Paragraph IV of Shire’s will provided that the Trust would be funded with $125,000 and that the trustees would pay $500 monthly to Shire’s daughter, Ruth Banner Gronin (Ruth), during her life and to Shire’s granddaughter, Gronin, upon Ruth’s death and Gronin’s attaining the age of 25 years. Further, paragraph IV states: "Upon the death of the survivor of [Ruth and Gronin], the balance of the trust fund (including any addition from Paragraph V) shall be added to the residue of my estate and be distributed, as provided in Paragraph VI."

Gronin was born in 1945. Shire died in 1948. After Ruth passed away in 1983, the monthly $500 payments from the Trust were made to Gronin.

At the time of trial, Gronin was also receiving monthly payments of $564 from Social Security and $88.38 from a casino pension plan. Her total monthly income was $1,152.38. Further, she had two bank accounts, each with a negligible balance. She testified that neither she nor Ruth had ever been able to save any money, because their income never exceeded their living expenses.

A trust officer for Wells Fargo testified that as of September 26, 2016, the Trust had a principal balance of $981,874.58. He further testified that the expected annual return for the

Trust, before fees and taxes, ranged from 6.40 percent to 8.10 percent. Consequently, the Trust could expect income and appreciation to be between approximately $64,000 and $81,000 annually. Evidence was also adduced that based on the rate of inflation, the present value of a $500 payment in 1948 would be either $4,997 or $5,400.29 today.

Before filing the petition, Wells Fargo attempted to identify potential heirs of the beneficiaries identified in paragraph VI of Shire’s will. In its petition, Wells Fargo specifically identified 12 individuals and entities that may have an interest in the residuary and requested the court to notify them of the proceeding. The petition requested that the court determine the beneficiaries under paragraph VI, which was bifurcated from the present proceeding and set for later consideration.

The following known beneficiaries were present at the hearing on the Trust’s modification: six individual beneficiaries participated by counsel, one individual beneficiary participated pro se, and the Nebraska Attorney General’s office participated on behalf of charitable beneficiaries. At Wells

907 N.W.2d 267

Fargo’s request, the court appointed an attorney to represent the "Unknown/Undiscovered Heirs," if any, of the beneficiaries under paragraph VI of Shire’s will (unknown beneficiaries).

After the hearing, the parties had the opportunity to submit posttrial briefs. Counsel for the unknown beneficiaries was the only party that opposed Wells Fargo’s motion. Neither the assistant attorney general nor the pro se beneficiary submitted any brief supporting or opposing the modification of the Trust. Counsel for the six beneficiaries submitted a brief which concluded: "On behalf of our clients, we respectfully request the Court enter an Order adjusting the monthly distribution to ... Gronin consistent with the Trustee’s evidence in such a fashion so as to not jeopardize the corpus of the Trust." No other beneficiaries expressed consent or an objection.

In February 2017, the court ruled that the requested modification of the trust was not warranted. Specifically, it ruled that the plain language of the Trust did not permit an increased distribution; § 30-3837(b) did not authorize a modification, because not all beneficiaries had consented; § 30-3837(e) did not permit a modification, because increasing Gronin’s annual payments would have a detrimental effect on the Trust’s residue, which would not adequately protect the nonconsenting beneficiaries; and § 30-3838 did not allow a modification, because there was not an unanticipated change in circumstances.

Gronin filed a timely appeal. We removed the case to our docket on our own motion pursuant to our authority to regulate the caseloads of the Nebraska Court of Appeals and this court.²

ASSIGNMENTS OF ERROR

Gronin assigns, restated, that the court erred in concluding that modification of the Trust, to provide increased disbursements to her, was not appropriate under § 30-3837(b) and (e) and the doctrine of deviation. Gronin also assigns, restated, that the court erred in concluding that her current living circumstances were not unanticipated by Shire and that the purpose of the Trust did not include providing a reasonable income to Gronin.

STANDARD OF REVIEW

Absent an equity question, an appellate court reviews trust administration matters for error appearing on the record; but where an equity question is presented, appellate review of that issue is de novo on the record.³ In a review de novo on the record, an appellate court reappraises the evidence as presented by the record and reaches its own independent conclusions on the matters at issue.⁴

Statutory interpretation presents a question of law.⁵ We independently review questions of law decided by a lower court.⁶

ANALYSIS

BENEFICIARIES DID NOT UNANIMOUSLY CONSENT TO MODIFICATION

Gronin and Wells Fargo argue that we should interpret § 30-3837(b), requiring the "consent of all of the beneficiaries,"

907 N.W.2d 268

to allow a modification when no known beneficiary has objected to the modification after receiving notice of it. Regarding unknown beneficiaries, they argue that—based on the Comments and Recommendations for Enactment of a Nebraska Uniform Trust Code⁷ —we should follow Neb. Rev. Stat. §§ 30-24,123 and 30-24,124 (Reissue 2016) of Nebraska’s Uniform Probate Code and permit the lack of objection by known beneficiaries with a commonality of interest with unknown beneficiaries to satisfy the statutory requirement. They argue that the objection by the attorney appointed to represent the unknown beneficiaries was only theoretical and should not bar application of this subsection here, because all residuary beneficiaries share a common interest.

The unknown beneficiaries argue that the plain language of § 30-3837(b) requires the consent of all beneficiaries and does not permit a commonality of interest representation for unknown beneficiaries.

Section 30-3837(b) provides, in relevant part, that "[a] non-charitable irrevocable trust may be modified upon consent of all of the beneficiaries if the court concludes that modification is not inconsistent with a material purpose of the trust."

Absent anything to the contrary, statutory language is to be given its plain meaning, and a court will not look beyond the statute or interpret it when the meaning of its words is plain, direct, and unambiguous.⁸ We have held that when the Legislature provides a direct reference to a section of a uniform law code when adopting that code, it incorporates the comments explaining that section.⁹

The Legislature has incorporated the comment to § 411 of the Uniform Trust Code (UTC) to § 30-3837, upon which it was modeled.¹⁰ In the UTC comment to § 411, subsection (b) is described as requiring "unanimous consent," while subsection (e) is described as being the applicable procedure "when the consent of less than all of the beneficiaries is available."¹¹

Based on the plain language of § 30-3837(b) and the comment to § 411, the party seeking a modification of a trust must affirmatively demonstrate that all beneficiaries have consented to the modification. Gronin and Wells Fargo’s argument that this requirement is satisfied when no known beneficiary has objected after receiving notice of a modification is not supported by either the plain language of the statute or the comment to § 411.

The language of § 30-3837(b), however, is not clear regarding the effect of potential unidentified beneficiaries, who might not even exist, on the consent requirement. But the comment to § 411 provides that "[t]he provisions of Article 3 on representation, virtual representation, and the appointment and approval of representatives appointed by the court apply to the determination of whether all beneficiaries have signified consent under this section."¹²

907 N.W.2d 269

The Nebraska Uniform Trust Code also contains the provisions of article 3 of the UTC. Section 30-3825 provides:

( UTC 304 ) Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown and not reasonably ascertainable, may be represented by and bound by another having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no conflict of interest between the representative and the person represented.

(Emphasis supplied.) Further, § 30-3826 states:

( UTC 305 ) (a) If the court

...